Cathay Pacific Airways Stock

Good afternoon. Welcome to the Cathay Group's 2026 Interim Results Analyst Briefing. My name is Ivan Chan, General Manager of Corporate Affairs for Cathay. Whether you're attending in person or online, it's a pleasure to see you all, and thank you for joining us. Introducing our speakers for today, we have Chief Customer and Commercial Officer, Ms. Lavinia Lau; our Chief Financial Officer, Ms. Rebecca Sharpe. We'll begin with presentations by Lavinia and Rebecca, after which we'll open the floor for questions. In case you haven't scanned the QR code at the reception for an electronic copy of the presentation, the slides and the video recording of today's briefing will be available for download at our Investor Relations page of our website later today.

So without further ado, may I invite Rebecca to start the presentation. Rebecca, please?

Thank you. Good afternoon, everyone. It's great to be here, and I'll add my welcome to all of you today. So let me move to the agenda. The plan for this afternoon is that I will speak for about 20 minutes or so, and I'm going to cover the results highlights and some of the business performance, more operational metrics. Then I'll pass to Lavinia, who will take us through some outlook and strategy. And then we'll, of course, open it up to questions for all of you. So let's dive into those exciting first half numbers. On this slide, we've got 6 of our key metrics. I will talk some of these in more detail as we go through the presentation. So maybe just to touch on the 3 of them here. Revenue in the first half was $68.1 billion, and that's a 20-plus percent increase from the first half last year. It is also the highest first half revenue on record, just an interesting fact. And as you see as we'll go through the presentation, you'll hear about the background as to what the drivers for that have been.

The other one I was going to touch on here is our dividend. So we've announced the first interim dividend for 2026 in the amount of $0.26 per ordinary share. That's a 30% increase on the number that we paid last year. So first half '25 was a $0.20 first interim dividend. And then, of course, the strong results come through in our earnings per ordinary share at the bottom over 75% of an increase that you can see there. So the strong performance that you see in these numbers presented today, I think a testament to the resilience that as an organization, we've built into our operations over the last few years that's enabled us to weather a very challenging, particularly second quarter of this year.

This slide, you've seen it before, is the summary of our profit numbers, but we're looking at it at different levels. So you can see there we start at the line that without any nonrecurring items and without any associates. So you can see that at the Cathay level with -- before all these sort of more one-off or other items, we've increased by about HKD 1 billion. And then you can see that we had nonrecurring items. You'll have read about that in the traffic report as well. I'm sure the major one in there was a $1.4 billion gain on deemed disposal when Air China did an A share issuance in June, and that diluted our shareholding from 15.09% down to 12.85%. And then we've also got the share of associates number in here. You can see we've seen an improvement in that number, too. That the biggest associates we have in that number are Air China and Air China Cargo.

And just a reminder that we capture their results 3 months in arrears. So their numbers included in our first half are their Q4 number and their Q1 number. So they haven't got any real Middle East impact in those numbers just yet. We'll see their Q2 number in our second half figures. And then yes, at the bottom line, a profit for the first half at the consolidated level of $6.2 billion compared with the $3.7 billion that we made this time last year. So then this chart is looking to map last year's $3.7 billion to this year's $6.2 billion. And as you can see on the chart, there's quite a few large variances amongst this road map. So on the revenue side, $10.1 billion for the customer travel business, the premium travel business that's added to these numbers, a combination of capacity change and strong demand.

The cargo business has contributed a $2.9 billion variance. But then, of course, you can see a couple of large red bars in terms of the cost side. You'll be not surprised to know that we've got a negative impact in our numbers of $8.6 billion on fuel costs. Some of that's capacity related, but of course, the biggest portion relates to the fuel price increase that we've seen. And then other operating costs, they've also increased. Again, some of that is capacity related, but some of it is cost increases. So suffice to say that's what takes us at a high level down to -- or up to rather our $6.2 billion profit for the first half of 2026.

So if I dive into that fuel question because I know you're all going to ask me about fuel. So let's talk a little bit about fuel. Of course, there are 3 key elements to fuel. We increased our consumption. Our capacity increased, as you'll see on some of the later slides. So of course, that drives an increase in cost. We have got a hedging gain in our first half of HKD 0.9 billion. But the biggest driver by far and away in our first half is the increase in the jet fuel price. You can see there overall for the first half, a 45% increase in our inter-plane cost. As usual, on the right-hand side of this chart, you can see our fuel hedging profile. And this is the position as at the 30th of June. So you can see that roughly, roughly for the next 12 months, we've got more just over 30% hedged. We hedge, as I talked last time, rent and our fuel hedging policy remains unchanged because that's another question I always get. It's not changed.

So if I then look at operating costs at a company level, but ignoring the fuel, although fuel is on here, we're showing you the fuel number plus the other operating costs. And of course, they've gone up. Even the operating costs have gone up even if I take the fuel out, so that's the dark green bar at the bottom. And over to the right, whilst, of course, these increases are related to capacity increases, they're also related to some other factors. As you can see in our cost per ATK, that number has gone up as well. And this is -- there's probably 3 key elements to the increase in our cost per ATK. We've got the sort of uncontrollable costs, so things like overflying costs increasing or landing and parking costs increasing in different parts of the world. You've also got some timing differences in here. So for example, this year, in the first half, we've had more maintenance requirements being undertaken. So that has a slightly higher impact in our cost per ATK this year.

And then we've got things where we've consciously spent more money. So investing for our customers. So our lounge we've opened the Wing, First this year. We've had the Beijing lounge open now for the sort of full first half open partway through last year. Those cost increases for running the lounges. And then also investing in our dining proposition. We're really looking to, of course, delight our customers. So there has been more investment in our dining proposition on board, and that drives a little bit into the cost per ATK. And then over and above that, of course, in the current economic environment, inflation is always there on different elements, different parts of our cost base. So I would be remiss to not mention there is an element of inflation here, too.

Turning to financing charges. You can see the big story here is the dramatic reduction in what we spent financing our business in the first half of this year compared to the first half of last year. So the cost or the net charge to the P&L has gone down by 26%. And the key drivers of that are, we've got less debt. Our strong result last year, of course, puts money or enables us to repay some of our debt. We also benefited from the lower interest rates that we've seen since the first half of last year, although not sure where that will go this year. And the other element is having more cash around us enables us to put it on deposit and earn some interest there, which offsets the interest you pay. So a number of factors supporting that drop in interest charges for 2026 first half.

Chart on the right is more for your reference. A number of people ask me about that. This is our split between fixed and floating rate borrowings. So I've said before, we generally like to try and aim to keep it around 50-50 and the balance at the end of June, not that different from the balance we had at the end of December. So while we're talking about financing numbers, let's look at cash. So similar to the waterfall or road map chart we had for our profit numbers. This chart maps our liquidity balance at the start of the year to the end of June. And you can see that it's not too different in absolute terms, $25 billion coming down to $23.6 billion at the end of June. And you can see the key drivers in there. The inflow we've seen from net operating activities, $13.7 billion, driven by the strong financial or profit number. That is a couple of billion higher than we saw in the first half of last year. I think that number was $11.2 billion.

And then you can see what we've done with that money. So the financing, the ins and outs, we draw loans, we repay them. So you can see that kind of stuff on the right-hand side. Maybe the key ones to mention there are the dividend. So we paid the second interim dividend related to 2025 in the first half of this year. So that's the $3.9 billion number there. And then, of course, the Qatar share buyback. You may remember, I talked at the end when we did the annual results briefing about the reason we had the sort of higher or elevated liquidity at the end of December was so we could pay for the Qatar shares. That was a $7 billion outflow.

So you can see in this first half map that coming out there, too. So at the end of June, we've got $23.6 billion in our liquidity. So that is cash and it's also access to facilities. And of course, we've got upcoming about 2 weeks' time, our straight bond of USD 650 million that were due to repay. Remember, we took that out in first half of 2021 due to repay later this month. So we're having a little bit of elevated levels of liquidity at the end of June in preparation for being able to repay this straight bond.

Qatar, I've mentioned that. We've included this slide. I won't be going through all this information. It's for your reference afterwards when you look back at this deck. The only thing that's different in this slide from the one I shared in March is the fact that we did a capital reduction in May. So that the Annual General Meeting, our shareholders approved that we could do a capital reduction to offset the $7 billion we paid for the Qatar shares. So it meant that we moved $7 billion out of our share capital number and into our distributable reserve. So if you're looking at the numbers, you can see the share capital number change and you wonder why. That's why, because we did a capital reduction to offset the buyback. And then, of course, we're very excited early this year to do our first Hong Kong dollar public bond, which I know I shouldn't necessarily say, but I think this was seen as a success, largest bond that's been done for a corporate. A lot of interest in this.

We issued $2.88 billion in the end. And this was us preparing for the straight bond that I said we're repaying later this month, so putting some money aside to do that. So what does all this mean in terms of liquidity and gearing profile? You can see here our gearing has ticked up a little bit from the end of last year. So buying back the shares from Qatar has had an impact. But we're in a significantly lower gearing level than we were a year ago off the back of the strong results in 2025 and into 2026. So then in terms of -- if I just touch on -- and as I say, you're familiar now, but the slides we've got here, I won't touch on every one because I'm conscious we want to get to questions, but you can refer to them later. So maybe just some of the key stats for Cathay Pacific, our premium travel brand. And it's exciting for me to see green numbers across the board this time.

And so you can see the revenue number up by 26.3% This, of course, is driven by a number of factors. So one of the things that I think is quite standout on this slide is the passengers we've carried. So the number of people who've flown on our planes in the first half has gone up by 17.5%. And that's a big driver for the revenue number going up. Of course, we have added capacity. So first half versus first half on the ASK basis, it's gone up by 11.8%. You may remember in March, we talked about estimating around a 10% increase year-on-year, and we're on track to do that for 2026. And of course, the passenger numbers come through in the load factor at 87.5%, which is high. And then we have seen an increase in yield, too, which is underpinning the revenue numbers.

So then charts that you're all familiar with in terms of capacity load factor and yield, and we set these out half by half, so you can compare the 6-month period. I suppose there on the load factor one, you can see looking back at our records, the load factor we've seen in the first half of 2026 is the highest on record for a first half. And that is where all these passenger numbers have come from and the change in yield also here. But the sort of -- you may remember when I talked in March, the strong Q4 that we saw in terms of passenger demand has definitely carried on into the first half of this year, and that underpins the numbers that we're sharing with you today.

If I then move on to touch cargo briefly. Similar slide and again, green across the board, which is very exciting to be standing here talking about. A similar story relatively, we've got the revenue going up by 23.9%. And that, again, is underpinned by some increase in capacity. So you may remember that a lot of our capacity comes from our passenger bellies. So as the capacity on the passenger side of the business has increased, it increases our cargo capacity, too. So that's coming through there. We've carried more cargo, 8.5% more cargo than we carried for the first half of last year. And then we've also seen an increase in our yield.

Same charts on the 3 metrics, capacity, load factor and yield for cargo. Now some of you may say, well, why is your capacity so much less in the first half of this year than it was in the second half of last year. It's higher than the first half of last year, but it is down in the second half. And that's because typically in the cargo space, we have a peak in the second half. So maintenance needs to be scheduled or more maintenance needs to be scheduled in the first half, and that is the case for 2026. We have done more maintenance, which takes some of our freighters out of the fleet for a while. And also some of that maintenance has actually been more extended than we anticipated. So capacity on cargo has been a little bit down more because of maintenance. And you're doing that as an organization or any airline to ensure you've got your maximum capacity available for the peak in the second half of the year.

Load factor, not a little bit higher, but not too different from our typical load factor in cargo. And again, this is -- just as a reminder, where we are is the largest air cargo hub in the world, we're very strong on the traveling west, the front haul, if you're in -- if you're a shipping analyst as well, the front haul, taking the cargo west. But cargo coming back this way, there's less of it. So typically, our planes are close to 100% full cargo on the way out, but they're far less cargo being carried on the way back. It has that balance has improved a little bit and that's what picks up the percentage there. So sort of regional cargo has been coming into Hong Kong. But yes, that's the reason why load factors for cargo are quite different from load factors for passenger business. Passengers want to go both ways. They generally want to come back again. The cargo doesn't.

Yield, again, a strong demand story. So as I'm sure you'll have read about the cargo demand in support of the AI infrastructure boom is definitely very real. AI infrastructure, tech products are moving and driving a high demand, hence, supporting yields. Then if I just touch briefly on HK Express. HK Express, of course, is our low-cost carrier. And they've also got a happier story. I can't say green across the board just yet, but we're getting closer. So their loss at a loss before interest and tax level was HKD 73 million, significant improvement from where we were for the first half of last year when we lost around HKD 0.5 billion. And so they had I think I talked back in March, a strong start to this year, and that continued. But of course, the jet fuel prices have impacted them in the second quarter, which then has had an impact on their overall numbers for the first half, but a big step change towards their turnaround journey that they are on.

And we see their fundamentals continuing to be strong. So things like the on-time performance, their focus on cost discipline, operating efficiency. These are all the things that are heading in the right direction in support of this substantial improvement on their path to a turnaround. And then sustainability, I won't dwell on this because I'm conscious I've got to pass on Lavinia. But again, a bit of information on some of the initiatives we're working on as a group. This remains a challenge for us as a business for all aviation. But yes, we're continuing to work on this.

So I'll pass on to Lavinia. Before I do, I do just want to say thank you to all of you. Today is my last financial briefing before I retire next month. And I know all of your questions and your support that I've received and your interest in Cathay as a group has been fantastic over the last 5.5 years. So thank you very much.

Thank you, Rebecca. So after a pretty encouraging first half, I guess, naturally, you all want to know what we -- how we see the second half of this year. So allow me to provide some insights. Starting on the passenger side on the travel side. So while we are cautiously optimistic about the second half. So looking into our current bookings and summer, well, we are halfway through quarter 3 actually. So in terms of the summer bookings and actually, the strong travel demand actually extends throughout quarter 3. So I think we remain pretty robust about quarter 3. As to quarter 4, I think it really depends on the Middle East situation. We believe that the underlying demand is still strong. And of course, we need to watch out on whether there's any further developments in the Middle East and whether there are other macroeconomic factors at play.

In terms of capacity, I think Rebecca has mentioned, I think overall, we are still looking at a growth of around 10% for the group for the whole year. I think that is very important. I think last year, we added a lot, especially during summertime on the long-haul routes, added a lot of capacity on the Americas and Europe and Australia. This year, we also do it in a more balanced manner. We added more regional growth. And that's very important because we are a network carrier. So as we continue to add more, more flights on each part of the route, it creates more connectivity via the Hong Kong hub, which will help us to build more loads and become more attractive to our customers.

So in terms of jet fuel, we don't have a crystal ball. Again, that really depends on the Middle East situation. But I guess our best guess is jet fuel will stay at a pretty high level or at the current level, at least for unless there are any new developments in the Middle East. And for that, so in order to mitigate that incremental cost, we'll continue to leverage our 2 tools, both hedging and fuel surcharge to continue to offset some of those incremental cost increases.

From a cargo perspective, yes, it's the same words that I'll use. We also remain cautiously optimistic about the second half. So Rebecca mentioned about the -- a lot of the cargo growth this year is really, again, there's very strong demand driven by this whole AI boom. So a lot of high-tech products traveling both within the region and also from Asia to U.S. I think we also -- I think we have to say that we are -- our strong network, both on the freighter side and on the passenger side did allow us to capture this AI boom quite effectively. Our teams have been talking to different customers in the past few weeks, I mean, trying to gauge their overall sentiment on the cargo peak season, which will start very soon. And again, I think overall, I'll turn that as cautiously optimistic.

They do believe that the current AI boom will at least last until the end of this year. And again, to leverage that, we will be adding capacity, as you show during peak season, particularly on the Hong Kong route. So if Hong Kong to the Americas, we'll be adding capacity. And also within the region, again, because some of these AI boom involves a lot of traffic between Southeast Asia and Northeast Asia, between Chinese Mainland, Southeast Asia, et cetera. So to capture these flows as well, we'll also be leveraging our subsidiary, Air Hong Kong, use some of their capacity to help carry some of these traffic.

So I think overall, on the cargo side, well, we are very committed. Actually, earlier this year, we have placed an additional orders for 2 more A350F freighters. And Air Hong Kong, they're also going to lease an additional A330 freighter to cover this peak season. So I think all in all, this demonstrates our confidence in the ongoing development of the Hong Kong cargo aviation hub. So I think this is a brief sort of like summary of how we are seeing the second half.

So let me shift gears a bit, talk a little bit about longer term. So this year is our 80th anniversary, a very happy time and a very important milestone for us. So at this time, when we reflect on what our next 10 years will be, we think that we'll continue on this dual track, sustain and elevate. We had 3 very positive years in terms of profitability. So this year, first half looking good. Hopefully, we also see a good fourth year. It's very important that we continue to sustain our profitability. Obviously, we want to keep our shareholders happy. But also very importantly, we do need these profits so that we can continue to invest in our business and invest in the Hong Kong aviation hub. And this is what exactly we plan to do in the next 10 years.

Some of you may remember that in the past couple of years, we always give 3 100 numbers to showcase our commitment to Hong Kong. But this year, I think, well, at our 80th anniversary milestone, we decided it's time for us to elevate our narrative to again demonstrate our commitment to our business and to the Hong Kong hub. So these are the 3 new 150 numbers that I want you to remember. So firstly, we have already committed around $150 billion investment already. This is committed. So for the next 10 years, obviously, we'll continue to add more investment. Our target in 10 years' time is to bring in a total of 150 new aircraft into the Cathay Group and also as a group, fly to 150 destinations. So just for sharing, currently, we fly to 103 destinations as a group. But in 10 years' time, we want to go 150.

So this is our ambition. And in terms of our investment, when we think about the already committed $150 billion, where do most of this investment and also where will most of our future investment go into? Well they go into a few key areas. The first most obvious area is our fleet. So here, we have already committed 105 aircraft. These are new orders, which will be delivered in the next few years. I presume you should be quite familiar because we mentioned them almost every time in our briefings. But just to refresh your memory, so starting with the ones which will be delivered first. So the narrow-body A320, A321neo, actually, the first of this batch of orders will arrive later this month.

And then going down chronologically, then next year, in the second half of next year, we will be expecting our first 777-9 aircraft that will be our new flagship fleet complete with first class and 3 other cabinets as well. Then going to that, the other side then from 2028, we'll start receiving our Airbus A350F freighters. And as I just mentioned now, including the 2 new orders that we made this year, we'll be expecting a total of 8 very efficient new generation cargo aircraft. And then last but not least, we have also placed orders for the CX regional wide-body fleet. So these 30 A330neos will also start coming into our fleet in 2028. So these are the existing 105 orders that we are expecting. But like I said, in 10 years' time, our expectation is that we'll bring in a total of 150 new aircraft.

Apart from the airframe or the aircraft itself, we also made a lot of investment in the customer experience, both in the air and on the ground. Again, I think you should be quite familiar with some of these cabin programs because we have been mentioning them in the past couple of years. So starting with our long-haul fleet, Boeing 777-300ER. I hope some of you might have the chance to try out Aria Suite already. Well, it has been very welcomed by our passengers. So glad to say that we are now halfway through the program. We are going to retrofit a total of 35 of our 777-300ER with this new product and also new premium economy. Currently, we have just passed the 18 mark. So we now have 18 of them flying the skies, and we expect to complete the whole program within 2027.

Next up, well, the hero or star product of this year, well, sort of like the sister or sibling of the Aria Suite, Aria Studio, this will be the new business cabin or business class product that we will be installing on our Airbus 330 regional aircraft. So this will be coming end of this year. So what we are expecting is that in the business class, there will also be a lie-flat bed and there will be direct aisle access and also a brand-new economy cabin. So this is something which is really something to look for -- look forward to towards the end of this year. 777-9, I've mentioned, second half of next year, new first class, we are all very excited about it. And of course, apart from new first class, it will be a brand-new aircraft, so complete with new cabins in the other 3 cabins as well, new products.

And last but not least, the narrow-body A321neo, as I mentioned, the first new one will be coming within this month, but we are also retrofitting the first 16 aircraft. For some of you who have been traveled -- who have traveled on that aircraft, you might find that, well, the economy class cabin may be a little bit less spacious than you want. We hurt you. So what we are doing, what we are going to do is to remove one whole row of economy seats so that to create more leg room, more space for our economy class passengers.

So all of these are a very important part of our $150 billion investment committed already. And cabin improvements will also continue to be our focus. Why? Because Cathay Pacific is a premium carrier. We will need to charge really premium pricing in order to -- I mean, justify our investments. But we -- in order to -- how can we charge premium pricing is really to provide value to our customers. And all these investments will help to increase our customers' willingness to pay. As I mentioned, the investment is not just in the air, but on the ground as well. Earlier this year, we have already reopened the brand new The Wing, First at HKIA. So these are the upcoming launches, in new launches in the pipeline. New York JFK we have mentioned before, we are still looking forward to have it within this year. And then next year, then -- well, for those who are familiar with HKIA again, so after The Wing, First, we are now -- we have already closed down the wing business for renovation.

And also in Tokyo Narita, that launch is also closed currently because we are going to expect a brand-new launch in the first half of next year. So again, all these ground and new products are there so that we can delight our customers more so as to increase their willingness to pay on us. Apart from all these hardware cabin ground products, which will all help us to generate bigger customer satisfaction and hopefully, more revenue. Of course, we'll continue to build or to continue to invest in making our business more effective, more efficient, more resilient. So these are our areas of excellence. I just want to particularly call out digital. Well, this is an area which we really are putting our bets on.

We invest over $3 billion in IT every year. And quite a lot of them will be -- quite a lot of that budget will be going into AI-related, agentic AI, et cetera, because all these we think will not only elevate the customer experience, but also help us in the back in increasing our effectiveness and productivity. So these are all areas that we will focus on.

At the end of the day, our vision is very clear. We want to be the best in all the 3 -- all the 4 lines of business that we are part of. And we believe that -- well, I think Ronald went -- in the March briefing, he has talked about this formula. We firmly believe that once we have happy team internally, happy teammates, we will have happy customers. And happy customers will generate happy shareholders because it will mean a more profitable business. So this is what we firmly believe in and which we will continue to work towards. And of course, the other thing is that we also believe that, well, as the home carrier of Hong Kong, we are there to grow with the Hong Kong Aviation Hub. The 3 runway system is a golden opportunity for us. So we will continue to invest like what I mentioned, because at the end, we think that what is good for Cathay will be good for Hong Kong and vice versa.

So I guess that's what I want to talk about. So this just final slide summarizes what Rebecca has mentioned about the financials and what I briefly talked about, about our long-term strategy and investment.

So I'll stop here, and let's start the Q&A session.

Good afternoon. Welcome to Cathay Group's 2025 Annual Results Analyst Briefing. My name is Andy Wong, General Manager, Corporate Affairs for Cathay. Whether you're attending here in person or online, it is a pleasure to see you all, and thank you for joining us. Introducing our speakers for today, Chief Executive Officer, Mr. Ronald Lam; Chief Financial Officer, Ms. Rebecca Sharpe. We'll begin the presentations by Ronald and Rebecca, after which we'll open the floor to questions. The slides and video recording of today's briefing will be available for download on our Investor Relations page after the briefing. Without further ado, let me invite Ronald to start the presentation. Ronald, please.

Good afternoon, everyone. Very happy to see all of you here. The first part, I would just give a brief overview on what we have achieved in the last 3 years and then how we're going to move forward for the next 5 years. And first of all, I would like to show you this time horizon is the journey we've gone through in recent years, starting with 2020 to 2022. Of course, those were the COVID-19 years.

And during those 3 years, we fought hard to survive and we did. And we also took the opportunity to transform many aspects of the Cathay Group so that when the pandemic was over, we could come out stronger than before. So Survive and Thrive. And it was probably the worst 3 years of our history over the past 80 years. And I think I'm so glad that is now well behind us.

And after that, 2023 to 2025, another 3 years where we spent our efforts rebuilding from the pandemic as well as investing in the future. Thanks to the opening of the Three Runway System at the end of 2024, it provided us with a major opportunity for growth, and that's what we did in the last 3 years. And last 3 years, I would say, was probably the best 3 years in our Cathay history. So we had the worst 3 years and then followed by the best 3 years. So quite a mirror image. And at the airline plus subsidiary level, I would say the loss we made in the worst 3 years is now fully recovered by the best 3 years already. So I think it's almost like a perfect mirror image.

Now we are into a new era. The next planning period for us is 2026 to 2030. The next 5 years is how we look at things. And 2026 is a new beginning, of course, and we are turning 80 years old. So it's a very special year from that regard. And these 5 years, there are also 2 themes. We need to sustain our success over the past 3 years. How can we make it consistent moving forward? How can we sustain our high performance into the next 5 years is one thing.

There are certain areas, although we've made progress in the last 3 years, but we are still not where we want it to be. So there are areas, especially when it comes to our customers, we still need to improve and further elevate customer experience is the focus areas. So on the one hand, I think we will consolidate over the success we had over the last 3 years. On the other hand, I think we'll make further progress in other areas so that I think we can climb another peak in the next 5 years. So that's briefly our time history.

So first of all, I would like to spend a little bit of time to sum up the last 3 years, 2023 to 2025. And our philosophy by the leadership team is very simple. Everything starts with our team because we believe happy team will lead to happy customers and happy customer would then lead to profitable business. This is our leadership philosophy. And therefore, in the last 3 years, we've spent a lot of time engaging with our team, listening to their concerns and then put out concrete actions to act on their concerns.

As you can see, we use one very important indicator to measure our morale and sentiment, which is team Net Promoter Score. And over the last 3 years, we have moved from the negative zone in 2023, gradually climb up to the positive zone, and then we ended 2025 at a historical high when it comes to our morale and sentiment. And the same has been sustained, by the way, into 2026. I would say whether it's our pilot cabin crew, our frontline ground employees or office-based employees across all groups, we've seen major uptick in terms of team Promoter Score. Very happy to see that.

And with happy team, we've also seen uptick on our customers' satisfaction. We use, again, a very simple overall indicator, which is customer Net Promoter Score to measure our customer satisfaction. We've made progress. We moved from positive 20-something to 30-something over the past few years. And each year, we have an uptick. But we're not satisfied with that. Actually, our target is to reach positive 40. We haven't quite done that. And as I mentioned, happy customer is the area we want to further elevate in the coming years.

Profitable business. This is not just for our shareholders. It is important that we maintain and achieve profitable business so that we can invest back into our own team as well as invest back into our customers. And from that perspective, I think we've done really, really well, 3 consecutive years of financial success consistently over the past 3 years.

From a consolidated profit angle, we make pretty much $10 billion on average in the last 3 years. And this is an unprecedented performance over a 3-year period. I think it's the high level of profit as well as the consistency of the profit. A golden measure we use to measure our financial success is return on capital employed. And also from that perspective, we have exceeded 10% for 3 consecutive years. In my 30 years career with Cathay, I've never seen this. And certainly, this is an unprecedented result as well from that perspective.

So to sum up, I think from a happy team and profitable business, it's probably the best ever achievement, and we need to sustain that. Customer -- happy customer front, we still have more work to do, although we have made great progress over the last 3 years, but we still want to elevate -- further elevate experience for our customers in the coming years.

In terms of we're building over the past 3 years, there's a quantitative perspective. There's also a qualitative perspective. Firstly, we're building quantitatively. We have built back our capacity in 2025 already. In fact, last year, 2025 was a record year when it comes to us launching new destination. Between Cathay Pacific and HK Express, we launched 20 new destinations as listed on this slide last year, and it was a record. And these new destinations has brought us to exceed 100 destinations worldwide at the end of last year.

And in terms of both passenger and cargo capacity by any measure, whether it's ASK, whether it's frequency, we have exceeded our pre-pandemic level already by end of last year. Equally important, we are to -- we build qualitatively as well. And we have been recognized over the past few years, in particular, in 2025 by many industry ranking and awards. On the Cathay Pacific front, we've been recognized by Skytrax as one of the top 3 airlines of the world. And in 2 specific categories, i.e., in-flight entertainment, as well as our economy class is being rated the world's best.

Cargo has been recognized by ATW in 2 times in the last 3 years as the Cargo Operator of the Year. So we are firmly a leading air cargo carrier of the world from a quality angle. And HK Express has been recognized by AirlineRatings last year as one of the top 5 low-cost carrier of the world. So we are very happy that across our 3 airlines, we've been recognized as one of the world leading ones. We won't stop there. I think our vision is very simple. We want whether it's Cathay Pacific, Cathay Cargo, HK Express to be the world's best. And we still have more work to do, but I think we are in a good position to build on.

Looking forward, the next 5 years, 2026 to 2030 will be another new era for the Cathay Group. And to guide our development in the next 5 years, among the leadership team, we have refreshed our strategy on the page, which will guide us forward in the next 5 years. As you can see, our strategy on the page comes in 3 languages, English, traditional Chinese and simplified Chinese. This is a reflection of our unique position, deep roots in Hong Kong, proudly part of China, connecting the world. We are Hong Kong. We are part of China, and we are very also very international. So this is our internally what we call a tripod position.

And our overall Cathay Group vision for the next 5 years is that we want to become our customers' most loved service brand. We are not just comparing ourselves with other airlines. We want to be able to compare us with any service brand that our customers get into touch with, and we want to be among their most loved service brand.

And across the 4 lines of business, as I mentioned, in turn, we want to be the world's best. Cathay Pacific, we want to become the world's best premium airline. We are now world's top 3 already. And then Cathay Cargo, we want to keep it that way that we are the world's best air cargo carrier. For HK Express, our ambition is to become Asia's best LCC low-cost carrier. And for Cathay Lifestyle, we want to be the world's best premium travel lifestyle brand. Very ambitious target, but as shown in the last few years, we are making good progress, and we are on track in moving towards this vision in the coming years.

The leadership philosophy, I explained for the last 3 years will continue into the next 5 years. This philosophy has proven to be sound and practical. We will always focus on our team first. And once our team are motivated, happy, they will make our customers happy. Once the customers are happy, they're more willing to choose us over other choices they might have, which will lead to profitable business. And of course, within profitable business, we have work to do to make sure that we have the best revenue efficiency, we have the best cost efficiency, and that will continue to be the focus for the next 5 years.

A few highlights in terms of our development for the next few years, starting with our fleet. So this year, we'll be taking delivery of 8 aircraft, and they are all belonging to the narrow-body family, A320 and A321neo. And then in the coming years from 2027, we'll be taking quite a few more such aircraft. And then in 2027, around second half of next year, we'll be taking delivery of our new generation long-haul fleet, 777-9 will finally arrive, and it will also come with our new generation first-class products on that new fleet.

So with the new fleet, we will continue to expand to more long-haul destination and more long-haul frequencies from second half of next year. And then come 2028, we'll take delivery both on the freighter side as well as the regional wide-body side. So freighter will be taking our first A350 freighter from 2028. And then our first A330-900, also known as A330neo aircraft will also arrive in 2028. Altogether, we have more than 100 new generation aircraft coming our way in the coming years. This is part of our HKD 100 billion investments into the future.

A majority of our investment will be spent on our fleet, modernizing our fleet. Not only that, we'll continue to upgrade our cabin products, which are very important to our customers. So already starting last year, we have been rolling out new cabin products on our 777-300ER with the now world-famous Aria Suite, new business class products as well as our new generation premium economy class products on our 777-300ER fleet. Currently, we have 14 of such aircraft retrofitted. And altogether, we will have 35 of them. So there will be more retrofitted aircraft coming out this year and next year on our 777.

Later this year, we have another hero product, which will be for our regional fleet. A330-300, also known as A330ceo aircraft will be equipped with brand-new business class as well. We are calling it Aria Studio. This is a sister product to Aria Suite. And this is a lie-flat business class seat for our regional fleet. Also, each seat would have direct aisle access because it will be in a 121 configuration. So our customers will be -- will find it very convenient that each seat will be given aisle access. So we'll continue to roll out throughout the next 2 years, starting end of this year, we'll see the first of such retrofitted aircraft.

And then next year, as I mentioned, the hero product is our 777-9 first-class cabin. We'll be introducing our new generation first-class cabin for coming with the 777-9 in the second half of next year. So each year, I think we are rolling out a new set of cabin products on different fleet. On the ground, we will continue to upgrade our lounges worldwide. And starting with Hong Kong, the Wing first lounge has been under renovation for quite a few months, and I'm glad to share that we're going to reopen very soon, in April is the plan that we'll open this lounge.

And this will be our new generation first-class lounge that our members and customers would have been looking forward to. So I'm also very excited to see the new lounge myself. Later this year, for the first time ever, we'll be having our own Cathay Pacific flagship lounge in New York JFK Airport for the first time. Again, a very exciting project that I look forward to experiencing the new lounge by myself. On the cargo front, our strategy is to provide value that other providers cannot match. Our tagline is that we know how. We ride on our expertise in shipping special shipments for our customers, whether they are time sensitive, temperature-sensitive or handling sensitive, we are the expert.

Cathay Cargo has been recognized as the expert within the industry in handling such kind of special cargo that requires special skill arrangement. We also want to excel on our digital leadership for Cathay Cargo. There are different initiatives to improve customer experience, operational efficiency using digital technology within cargo.

Our lifestyle business will continue to focus on 2 areas: our mileage sales business as well as product sales. Our mileage sales, Asia Miles currency has been very popular in Hong Kong and in Taiwan, for example. And our focus moving forward is to strengthen Asia Miles presence in the Chinese Mainland, in particular, the Greater Bay Area cities.

On the product business side, we will focus on Cathay Shop, Cathay Holiday as 2 very important pillar. So taking the chance of the 80th anniversary, we'll be launching many special edition Cathay branded merchandise. So I think some of you would have seen it outside on display. So a very exciting year for us.

So speaking of 80th anniversary, I have a short video to share with you, which feature our special livery aircraft, what we call lettuce leaf sandwich aircraft. We have 2 of such aircraft, one on the passenger side using our A350 aircraft and one on the cargo side using our 747 freighter. So enjoy the video.

[Presentation]

How many of you would have seen those 2 aircraft? No. Okay. You'll be lucky to see them because they've been flying busy flying through the world. And I think many, many pictures and social media posts have been created because of them over the last 2 months. And not only that, those 2 aircraft are more looking back, right, to celebrate our heritage and history. This Monday, we've unveiled a more future-looking aircraft with what we call the Spirit of Hong Kong with a special Hong Kong artist design artwork on this plane. And it's been flying across the world to promote Hong Kong arts and culture as well as the Spirit of Hong Kong.

And this one is the fifth generation Spirit of Hong Kong aircraft already. The first one we introduced back in 1997 during the handover. And then since then, this is the fifth generation.

Starting March, we are also launching Vintage Uniform Show on our aircraft. So chances are when you take our flights this month onwards until end of the year, you will spot some of our cabin crew in vintage uniform. And also across the airport, we will have some of our frontline employees wearing this vintage uniform from the past many decades. Last, but not the least, as I mentioned, on the lifestyle side, we are also launching many new and creative Cathay branded merchandise to celebrate 80th anniversary. So that concludes my presentation, and let me pass the time to our CFO, Rebecca, to walk you through the numbers. Thank you.

Thank you, Ronald, and good afternoon, everyone. I have to say, I was remembering that the very first analyst briefing I did, I was talking about double-digit losses. So it's really exciting to me today to be talking for the first time about double-digit profits. So -- and as Ronald has explained, off the back of 3 consecutive profitable years.

So as normal, I will follow a similar presentation that we've done before. I'll talk a bit about the financial highlights and then something about the -- some of the key business statistics, more of the operational statistics and then a bit about outlook to wrap up before we move to Q&A with Ronald and myself. So let's get started.

This slide, you will be familiar with it. We've got some of the key 6 sort of top numbers that we refer to. I will cover some of these through the course of the presentation. So the one I just want to draw attention to here is around our revenue. So at GBP 116.8 million, almost GBP 117 billion, fascinating fact for you. This is the highest revenue number we've ever generated in our 80-year history. So this was a real milestone for us in 2025.

This slide covers the consolidated profit, but we split it out at a number of levels. So you can see some of the buildup. And looking back over the 3 years to 2025. You can see there we had a small nonrecurring item in there, which is an impairment provision on some fixed assets in our subsidiaries that we've been able to write back based on the better performance. And the other line that you can see that doesn't feature on other slides is the improvement in the associates line. So that also improved to contribute to our bottom line number of HKD 10.8 billion for the year.

This chart is a map of the 2024 consolidated number at HKD 9.9 billion and how we get to the consolidated number for 2025. And of course, the big drivers you can see on here are the key things that affected our 2025 number. The story effectively of much higher capacity. So you'll see a bit more detail later, but around 26% increase in capacity, and that drove the big green bar there in terms of revenue, but also the larger red bar further to the right because, of course, we incurred greater costs in order to support this higher operations.

But equally, the other big element in there is the yields going down. As we expected, we talked about this back in August. We expected yields to continue to normalize, and they did. That was an impact of about 10% over the course of the full year. Fuel, this is a bit of a hot topic at the moment. I'm sure you'll have questions for us on this later. But our fuel costs increased, of course, because we increased the capacity during the course of the year. But that was offset because actually, to some degree, because the fuel price last year for whole '25 was actually around 9% less than it was in 2024.

So we got the benefit of a lower fuel price, but of course, higher fuel costs because we're operating greater capacity. But maybe at this point, you can see on the right-hand side, the chart where we set out our hedging. So I think you're all familiar with the fact that we hedge our fuel. And so you can see that for 2026, we've got about 30% of our fuel hedged at around or just under $70 a barrel. This is hedged on crude oil -- crude oil hedges rather than jet fuel.

And maybe just to talk about jet fuel briefly because, of course, that is the large number or the elephant in the room perhaps. I think on average, since the conflict in the Middle East started, the jet fuel price has been around USD 167. Now if I look at that compared to the average jet fuel price for January and February, it's almost double. So you can see the step change that we've seen in jet fuel just over the last sort of 10 days.

It's a dramatic increase. And so our hedging is on crude oil rather than jet fuel. And therefore, whilst we do have some protection from that hedging, obviously, it's not protecting against the jet fuel price in totality because that refiners difference or the cost of getting the fuel from crude to jet, the refinery is charging a huge amount, the crack spread, and that is significant at the moment.

Our fuel hedging policy, though, does stay in place. We're continuing to be operate it the same way as we have done for the past number of years during 2025, and it remains in place today. I know that's another question you always ask me, so I'll answer it now.

In terms of costs overall, this slide is setting out our cost per ATK, you can see including and excluding fuel, of course, our costs, the chart on the left, you can see them going up because we have increased our capacity. But the trend as a result of economies of scale is our cost per ATK coming down. So it was around 2.4% reduction if I exclude fuel between 2024 and 2025. So again, that we talked about that, I think, previously, that was as expected.

Financing, of course, this is a key number for us, too. Chart on the left is telling you what the total cost of our financing was or a net number. And you can see that in 2025, that was a similar level to 2023. And the reason for that going down was a combination of 2 factors. Of course, we saw the interest rates start to go down in 2025. But also, we -- off the back of generating profits in '23, '24, we were able to pay off some of the debt that we had, and therefore, we're not borrowing at such high levels. And therefore, that brings our financing charges down, of course.

Chart on the right shows you the split between our borrowings in terms of fixed versus floating. And you can see, I think I've talked about this before as well. We typically try to have around 50% in terms of fixed versus floating. We hover sort of around that number. You can see it was 48% versus 52% for 2025. And that strong profit position, you can see it drove into the cash flow numbers.

So this slide is mapping our liquidity at the end of 2024, around HKD 19 billion and mapping it through to the HKD 25.4 billion that we had at the end of 2025. And the big green bar that you can see, of course, is the cash generation from our operations. We were able, therefore, to use it to invest. So some of the products that Ronald was talking about earlier, the aircraft, obviously, you have to pay some money upfront for some of those. We're starting to make investments, so around HKD 9 billion spend there. And we were also able to repay some of our financing as a result of the cash generation.

Some funding, we refinanced. You can see new financing coming in, some we repaid, and we ended up with a balance of HKD 25.4 billion at the end of the year. Now you might say to me that's quite a big difference from the number at the start of the year, and that is shown on here, too. The reason for that, I'm sure you're all aware that we bought back the Qatar shareholding last month completed, and that cost us around HKD 7 billion. And so towards the end of last year, we were building up funds to be able to fund that buyback. So hence, the number at the end of 2025 was somewhat elevated as a result.

At the end of February, of course, it came down because we paid for it. The other thing you can see on this chart is our gearing number, and that was down to 0.6 at the end of last year. So a healthy position. And the other thing this reflects too is the debt level. So you can see also, as I mentioned earlier, that has come down too.

One of the elements of that, you may remember the end of 2024, we bought back a large portion, around 68% of the convertible bond. The remainder of that bond, around 2.1 billion was converted during the course of 2025. So it moved out of our debt balance and into our share capital and hence, brought the debt balance down too.

Finally, on this section, I haven't talked about it yet, I should have done this at the start, the dividend. So the second interim dividend that we've announced today of HKD 0.64. So added to the HKD 0.20 we paid in October, made a total -- or makes a total HKD 0.84 dividend per share.

You can see here, and as we mentioned the slide, although it's small writing, so you probably can't read it. But our policy is to pay approximately 50% of our profit after tax, adjusting for exceptional noncash items and of course, taking into account the environment at the time. But yes, we've announced today a second interim dividend of HKD 0.64 per share. And of course, that's a little bit higher because following the buyback, there's less shares in circulation. So the 50% number has a bit further to or more on a per share basis. So that's a very quick sort of wrap-up of the financial numbers.

If I move perhaps more into the business elements, in terms of Cathay Pacific, this is our premium travel airline. This slide sets out the key statistics. So here, you can see the story that I mentioned earlier in terms of our revenue has gone up by almost 16%, but capacity went up by 26%. And so that's where you see the impact coming through on the yield going down by the 10% as those 2 parts of the equation intersect.

So we continue to add more passenger flights and destinations as we grew that capacity. And the other thing that was slightly stronger in 2025 compared to 2024 was the load factors. And you can see those more clearly on this page. So they're in the middle chart. You can see that progressive increase over the last 4 halves of our load factors continuing up.

So this chart is trying to show you by each half of 2024 and 2025, the numbers in terms of capacity, load factor and yield, as I say, load factor, you can see that upward trajectory; capacity, of course, you all know, we've been gradually increasing that over the past 2 years; and yield on the other side, again, we've talked about it a lot, the normalization of yield. The slightly interesting thing in 2025 was the second half yield managed to stay at a similar level to the first half. So you can see that sort of tailing off of the yield normalization.

Moving on to Cathay Cargo, our second line of business. Again, the same slide as I've got for the premium travel. We've got the cargo revenue at a very similar level to the level it was in 2024. Their capacity went up too, not by as much as the passenger side of the business, but the reason for the capacity increase in cargo is the bellies of our passenger planes. There was not additional capacity on the freighters, but it was in the bellies of our passenger planes. They also saw some yield normalization, but not to such a strong or a large amount is on the passenger side of the business. And their load factors stayed very similar year-on-year.

And then this, again, the same chart as we had for the travel business. You can see each half year numbers are somewhat different to the passenger part of the business. But -- so you can see that sort of steady load factor across the 2 years. Yield, first half, second half, we see that the second half was stronger. And the big difference in the capacity first half, second half for 2025 was in the first half of the year, we had some of our freighters for extended maintenance. So we didn't have quite as much capacity on the freighters themselves flying. But that was back available in the second half of 2025, and you can see that coming through there.

I remember that we talked in August about what was the sort of peak going to be like for the cargo business because we often talk about the fact that the second half of the year for cargo, you have a sort of peak in Q4 as you get to Q4. And we wondered whether because of the sort of tariff situation and everybody was wondering is all the cargo being pulled forward in order because people were sort of stocking up, would there be a peak at the same level? I would say the cargo peak for Cathay Cargo was a strong peak in Q4 of last year.

Then our lifestyle business, I won't touch on that. Ronald has elaborated earlier. Moving on to HK Express. So this is our fourth line of business. Now their capacity dramatically increased again last year, more than 30% during the course of the year. And you remember the prior year, it already increased by around 46%. So they've had a really strong capacity increase over the past couple of years. They launched more destinations. I think they're flying to around 37 by the end of last year and operating around 44 aircraft at the end of the year.

In terms of the numbers, you'll have read in the announcement, I'm sure that they were loss-making in 2025. There you can see that capacity increase of nearly 32%, but the revenue only goes up by 7%, impacted by yield going down and load factor going down. And they were affected by a number of things, but the most significant, and again, we did talk about this in August was the changes in customer preference.

So you remember, we talked quite a lot about Japan back in the summer with the earthquake rumor. And although that sounds a bit sort of unusual perhaps, but it had a big impact on the demand for our flights to Japan on HK Express in July and August, particularly. So that, of course, came through in our second half number.

The other thing is they're increasing their capacity and they're adding new destinations. Some of these are destinations that we've not flown to before. There's not been an airline to fly between Hong Kong and that destination. So these new destinations take time to mature. So we are making a bit of an investment in raising awareness and creating new destinations, and that will take some time to mature.

Then the industry-wide Pratt & Whitney issue continues on. I think we had about 5 aircraft on ground of HK Express during the course of last year, which is similar to the previous year as the Pratt & Whitney engines are not able to be repaired as yet. So that will continue on. But although these numbers perhaps look a bit negative, shall we say, I have to say the fundamentals of HK Express continue to improve. So things like their utilization of aircraft continue to go up. Their cost efficiencies are continuing to improve. Their on-time performance is strong.

So from a sort of business from a group perspective, we are confident in their future trajectory, and we do see a path to profitability for them off the back of these strong fundamentals. In terms of sustainability, just to briefly finish off on this section, you know this is important to us. It's one of our key areas of focus in terms of sustainability leadership for the group as a whole.

Our sustainability report will be published next month alongside our annual report. There's lots and lots of interesting information and facts for you in there to help you with your analysis. The 2 key areas for focus, as we've talked about before, our climate change and the circular economy. Climate change because, of course, this is financially material to us as a group, circular economy because this is very important to our customers.

We have lots of initiatives underway in both these areas. If you've been on some of our flights, maybe you've heard our cabin crew asking to collect the plastic bottles back. So we've got lots of different things in order to remote development and improvements in both of these areas. But as I've said before, this is a challenge for the aviation sector, and it does need many stakeholders to get involved in order to work our way through this particular challenge.

The last but not least, outlook. The first thing I was just going to briefly touch on, and this slide is more for your sort of later reference. You've probably read it in the press statements, et cetera, our share buyback from Qatar Airways that we completed late last month.

As I said before, some of the information in these slides is for your easy reference. I don't talk to every single bullet point on them. But yes, this was a good outcome in terms of Qatar asking us if we're interested to buy their shares back and us deciding that this was a way to have an orderly exit for them as an organization. And of course, it has improved our earnings per share and the dividend per share as well. But that happened post year-end.

In terms of our outlook for our passenger businesses. So we're confident in 2026, subject to Middle East geopolitical challenges at the moment, but we're expecting to grow our passenger capacity by around 10% for the year. So this, of course, is quite a bit less than the last couple of years. But we -- as Ronald already mentioned earlier, we're back to 100% capacity. So this is sort of moving us beyond that.

We do see various challenges. Of course, the supply chain continues to be challenged, whether it's new aircraft deliveries, whether it's parts for maintenance. That still does have challenges, and we anticipate they will continue. We've got lots of processes and procedures in place to try and mitigate the impact, but it is something that should be flagged as a risk for us going forward. And of course, it goes without saying the current Middle East conflict is a part of sort of some huge level of uncertainty and volatility at the moment and how that plays out is really hard to assess at the moment.

In terms of cargo, similar. The cargo flows, again, hard to predict or project. But as Ronald talked to earlier, our specializations give us some advantages in certain areas and our ability to be flexible with our network to move where the demand is coming from has enabled us to have a solid performance in cargo in 2025. And we also have the 6 freighter aircraft delivering in the future. Until then, their increase in capacity on the cargo side will come -- continue to come from the increased capacity on the passenger aircraft.

So to wrap up before we -- I pass over to Andy to questions. We've had 3 solid -- or 3 consecutive solid years of financial performance, which on the back of that has enabled us to strengthen our balance sheet. We've been able to buy back shares. We've been able to reward our people. We've been able to commit to investing HKD 100 billion in aircraft, in product, et cetera, for our customers, for Hong Kong. We've been able to pay dividends as a result as well.

So as we look forward into 2026, we're confident this year with a 10% capacity. I'm caveating that based on the current world situation. But generally, we're confident with our 10% capacity projection for the rest of the year. And of course, also, as Ronald said, 2026 is a very special year for us. It's our 80th anniversary, and we'll be holding all sorts of exciting events through the course of the year to mark the 8 decades that we've grown in Hong Kong and to celebrate our unique position as being deeply rooted in Hong Kong, proudly part of China and connecting us to the world. With that, I will hand on to Q&A.